GD Searle & Co. v. Medicore Communications, Inc.

• Decision Date: 13 February 1994
• Docket Number: No. 92 Civ. 0552 (DNE).,92 Civ. 0552 (DNE).
• Parties: G.D. SEARLE & CO., Plaintiff, v. MEDICORE COMMUNICATIONS, INC. d/b/a Park Row Publishers, Carol Cooper and Judith Giusto, Defendants.
• Court: U.S. District Court — Southern District of New York

843 F. Supp. 895

G.D. SEARLE & CO., Plaintiff, v. MEDICORE COMMUNICATIONS, INC. d/b/a Park Row Publishers, Carol Cooper and Judith Giusto, Defendants.

No. 92 Civ. 0552 (DNE).

United States District Court, S.D. New York.

February 13, 1994.

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Golenbock, Eiseman, Assor & Bell, New York City (Richard S. Taffet, of counsel), for plaintiff.

Berger Steingut Tarnoff & Stern, New York City (Leonard S. Elman, Robert J. Smith, of counsel), for defendants.

OPINION & ORDER

EDELSTEIN, District Judge:

Plaintiff G.D. Searle & Co. ("Searle") brings this action against defendants Medicore Communications, Inc. d/b/a Park Row Publishers ("Medicore"), Carol Cooper ("Cooper"), and Judith Giusto ("Giusto") for breach of contract, indemnification, fraud, tortious interference with contractual relations, and conversion in connection with a contract for services to be provided by Medicore. Searle alleges damages in the amount of $218,675.00.

Plaintiff has moved, pursuant to Federal Rule of Civil Procedure ("Rule") 56, for summary judgment on each of its five claims. Defendants have filed a cross-motion for summary judgment on all claims, and for sanctions pursuant to Rule 11.

I. BACKGROUND

The parties are in agreement as to many of the underlying facts of the instant controversy. The following summary of facts is undisputed except where noted.¹

Plaintiff G.D. Searle & Co. is a multinational pharmaceutical corporation incorporated in Delaware, with its principal place of business in Illinois. Defendant Medicore Communications, Inc., a New York corporation, published medical periodicals and other materials, and organized medical symposia on behalf of its clients, which included pharmaceutical companies such as Searle. Medicore conducted its business under the name Park Row Publishers; the company is still in existence, but no longer operates. Defendant Carol Cooper is a resident of the State of New York who, at all times relevant to this matter, was the president of Medicore. Defendant Judith Giusto is a resident of the State of West Virginia who, at all relevant times, was the executive vice president of Medicore. As of April 1991, Cooper and Giusto were the sole shareholders of Medicore.

Searle contracted with Medicore to organize and manage a "symposium" ("Norpace symposium") designed to promote, as well as to educate the medical community regarding the uses of, Norpace CR, a drug developed by Searle for the treatment of arrhythmia. This symposium consisted of a series of eight medical education conferences to be held in various cities throughout the United States.

Searle sent Medicore a two-page letter agreement regarding the Norpace symposium ("letter agreement"), dated January 28, 1991, which was executed by Cooper on behalf of Medicore on February 5, 1991. The letter agreement stated that its duration would extend from February 1 to December 31, 1991, and that either party might terminate the agreement at any time by providing the other party with thirty days written notice. According to this letter agreement, Medicore was to provide the "necessary services" for the Norpace symposium, in conformity with a proposal that was attached and incorporated by reference as "Exhibit A" to the agreement. The parties concur that the "necessary services" set forth in the agreement included arranging for the various conferences; developing, printing, and sending invitations and other meeting materials; arranging for faculty lecturers and attendees from the medical community; preparing slide presentations and other audio-visual aids as required; and confirming guest attendance and making all lodging, food, and related arrangements for those attending the conference.

The letter agreement provided further that (1) in consideration for Medicore's provision of these services, Searle would pay Medicore a management fee as specified in the agreement; (2) Searle would reimburse Medicore for all out-of-pocket expenses incurred by Medicore in connection with the conferences, up to a specified amount; (3) Medicore would bill all expenses to Searle at cost and without mark-up; (4) Medicore would submit itemized statements of services and expenses to Searle in order to obtain payment; (5) Medicore was permitted to contract with third parties² on behalf of Searle; and (6) Medicore would indemnify Searle against any claims for payment brought against Searle by third parties, provided that Searle had made the required payments to Medicore.

The parties agree that, in providing the "necessary services" set forth in the letter agreement, Medicore was authorized to contract with third party vendors for various services associated with the Norpace symposium. Furthermore, the parties agree that Searle was not required to have any contact or dealings with third party vendors, and that Medicore was responsible for paying all third parties for their services.³ Plaintiff asserts further, however, that payment of these third parties in consideration for their services was itself one of the "necessary services" provided for in the letter agreement such that Medicore's failure to pay third parties constituted a breach of Medicore's duties to Searle, and not merely a breach of Medicore's duties to third parties arising from Medicore's separate contracts with them. It is plaintiff's position that, regardless of Medicore's duties to third parties arising from Medicore's separate contracts with them, under the terms of the letter agreement Medicore owed a duty to Searle to pay third party vendors such that failure to do so rendered Medicore liable to Searle in addition to, and independent of, Medicore's liability to third parties.

Defendants deny that payment to third parties was a "necessary service," or that Medicore had any duty to Searle to pay third parties under the terms of the letter agreement. Defendants' position is that, although Medicore and not Searle was responsible for paying third party vendors hired in connection with the Norpace symposium, Medicore's failure to pay certain third party vendors did not render Medicore liable to Searle other than by way of the various provisions in the letter agreement regarding indemnification.

Two revisions to the letter agreement, dated February 6 and April 4, 1991, reflected cost changes for several of the conferences; save for these two revisions, which are not the subject of any dispute, the letter agreement remained unchanged during all relevant periods.

Payments by Searle to Medicore were to be made periodically, and were conditioned upon the submission of invoices by Medicore to Searle. Medicore submitted an initial invoice to Searle for each conference, requesting payment in advance for certain expenses, or reimbursement for expenses Medicore had already incurred, as well as partial payment of Medicore's management fee. Periodically thereafter, additional invoices were submitted to Searle that reflected charges for expenses incurred and fees, and after the conferences were completed, a final reconciliation invoice was submitted to Searle for each conference.

The parties agree that Searle paid each and every invoice submitted to it by Medicore, although Medicore avers that none of these payments was received in a timely fashion. The payments made by Searle in connection with the Norpace symposium totalled $358,216.00. Of this amount, $110,500.00 represented payment by Searle of Medicore's management fee, and $247,716.00 represented full payment of the out-of-pocket expenses incurred by Medicore in connection with the Norpace symposium. Medicore, in turn, organized and managed the Norpace symposium, frequently relying on third party vendors such as printers, hotels, and travel agents to provide some of the "necessary services" for the various conferences. Plaintiff does not allege that Medicore's performance of its duties under the letter agreement was unsatisfactory in any respect other than its failure to pay certain third party vendors for their services.

During the first half of 1991, Medicore experienced "cash flow problems." The origins of Medicore's cash flow difficulties, and precisely when these difficulties first arose, is disputed by the parties. Plaintiff avers that defendants experienced cash flow problems at least as early as January 1991, but did not inform plaintiff of them until several months later. Defendants blame Medicore's cash flow problems on "the constant lateness of the payments by Searle, coupled with Searle's refusal to advance money to Medicore to cover preliminary expenses...." Mem. of Law In Supp. of Defs.' Cross-Mot. for Summ. J., at 8. In a letter dated July 11, 1991, Cooper and Giusto informed Searle that Medicore would use payments made by Searle in connection with specifically identified invoices, along with existing funds, to pay the balance of outstanding bills from several third parties that had provided services in connection with the Norpace symposium. Although this letter stated that its purpose was to confirm earlier discussions between Medicore and Searle, the parties dispute the contents of these earlier discussions, and therefore disagree as to the precise meaning of the letter.

Specifically, the parties disagree as to what was said during a telephone call that took place on or shortly before July 11, 1991, between Giusto and Kim Cysewski ("Cysewski"), manager of Searle's U.S. marketing finance department. Plaintiff avers that during this telephone call, Giusto represented to Cysewski that all funds paid by Searle on outstanding invoices from Medicore would be used exclusively to satisfy Medicore's outstanding obligations to third-party vendors connected with the Norpace symposium. Defendants deny that Giusto made any such representation, and assert that Giusto merely stated that "every effort would be made" to pay the third party vendors, but that the payments received...